Why Gold Is Still The Best Basis for Money
The comments below are an edited and abridged synopsis of an article by Nathan Lewis
To understand why gold works as a standard of monetary value, we must understand what makes good money. Monetary thinkers have always known that the best money is stable money (stable in value).
The market economy is organized via prices, profit margins, returns on capital and interest rates. Changes in the value of the currency derange this process, creating chaos and havoc.
Gold is the least fluctuating and the only universal currency. The US became one of the most successful countries in the world because people like President James Madison understood it.
Gold is the only universal currency, the only thing (along with silver) that people have used as the basis of money, which then allows fixed exchange rates between countries, simplifying trade and investment. Pre-1914, most governments participated in the gold standard. It was reassembled during the 1920s, and again in 1944 at Bretton Woods. There’s been no difficulty establishing world monetary systems based on gold.
Most countries today do not have free-floating currencies; they have fixed exchange rates. Some are stabilized against a major international currency. Most are part of the dollar or euro currency blocs. The only significant difference between the dollar/euro currency bloc and the prior world currency bloc based on gold is the standard of value: gold, or the floating fiat currency.
There is little interest in establishing a unified world currency bloc. No one would trust the Fed/ECB, because they are subject to political pressures, or other agendas, to which gold is immune. The Fed/ECB can also serve as a means of imposing political pressures.
Gold’s performance as a standard of stable value has been exemplary. The things that the gold standard made possible have never been replicated under fiat currencies.
Economies work best when currencies are stable in value. The best way to achieve this has always been to base a currency on gold. Nobody has ever found a better way.